Conventional wisdom says you punt while up and facing 4th-and-1 on your own 40. Lovie Smith is not a conventional guy.
Obviously, punting here would have given the Falcons much worse field position and made it much tougher for them to score. That said, there's a case to be made for going for it, keeping the ball and being able to run out the clock.
People will probably kill Smith for this decision, but it's easy to see what he was thinking. The results are generally all that matters, though, so it seems like maybe they should have punted.